Exhibit 2
GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)
| At | At | |||||||||
| September 30 | December 31 | |||||||||
| 2002 | 2001 | |||||||||
| (Unaudited) | ||||||||||
ASSETS | ||||||||||
Current Assets: | ||||||||||
| Cash and cash equivalents | $ | 32,706 | $ | 20,236 | ||||||
| Accounts receivable, net | 3,909 | 5,710 | ||||||||
| Receivables from sales representatives | 3,241 | 709 | ||||||||
| Receivables from related party sales representatives | — | 2,900 | ||||||||
| Inventory of paper | 525 | 856 | ||||||||
| Prepaid expenses and other current assets | 1,215 | 1,122 | ||||||||
Total Current Assets | 41,596 | 31,533 | ||||||||
| Property and equipment, net | 15,336 | 19,058 | ||||||||
| Intangible assets, net | — | 3 | ||||||||
| Long term investments | 100 | 100 | ||||||||
| Bonds held to maturity, at amortized cost | 1,626 | 1,709 | ||||||||
| Other assets | 1,151 | 1,199 | ||||||||
Total Assets | $ | 59,809 | $ | 53,602 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
Current Liabilities: | ||||||||||
| Accounts payable | $ | 2,910 | $ | 3,625 | ||||||
| Deferred income and customer prepayments | 18,736 | 17,122 | ||||||||
| Accrued liabilities | 5,101 | 5,127 | ||||||||
| Income taxes payable | 193 | 164 | ||||||||
Total Current Liabilities | 26,940 | 26,038 | ||||||||
| Liabilities for incentive and bonus plans | 1,250 | 1,434 | ||||||||
| Amount due to parent company | 11,404 | 11,404 | ||||||||
| Minority interest | 2,683 | 2,515 | ||||||||
| Deferred tax liability | 857 | 610 | ||||||||
Total Liabilities | 43,134 | 42,001 | ||||||||
Shareholders’ equity: | ||||||||||
| Ordinary shares, US$0.01 par value; 50,000,000 shares authorized; 26,308,949 (2001: 26,303,949) shares issued and outstanding | 263 | 263 | ||||||||
| Additional paid in capital | 80,461 | 80,196 | ||||||||
| Retained deficit | (58,961 | ) | (61,987 | ) | ||||||
| Less: Unearned compensation | (5,088 | ) | (6,871 | ) | ||||||
Total shareholders’ equity | 16,675 | 11,601 | ||||||||
Total liabilities and shareholders’ equity | $ | 59,809 | $ | 53,602 | ||||||
GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)
| Three months ended | Nine months ended | ||||||||||||||||
| September 30 | September 30 | ||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Revenues: | |||||||||||||||||
| Online services (Note 1) | $ | 13,010 | $ | 13,596 | $ | 38,661 | $ | 41,965 | |||||||||
| Other media services (Note 1) | 9,119 | 9,770 | 26,144 | 29,335 | |||||||||||||
| Miscellaneous | 157 | 193 | 477 | 599 | |||||||||||||
| 22,286 | 23,559 | 65,282 | 71,899 | ||||||||||||||
Operating Expenses: | |||||||||||||||||
| Sales (Note 1) | 7,572 | 7,722 | 22,233 | 24,296 | |||||||||||||
| Circulation | 2,778 | 2,761 | 8,741 | 8,883 | |||||||||||||
| General and administrative | 7,564 | 7,783 | 22,005 | 26,083 | |||||||||||||
| Online services development | 1,400 | 1,677 | 4,085 | 6,989 | |||||||||||||
| Non-cash compensation expense (Note 2) | 651 | 494 | 1,999 | 1,965 | |||||||||||||
| Amortization of intangibles/Software development cost | 983 | 869 | 2,715 | 2,607 | |||||||||||||
Total Operating Expenses | 20,948 | 21,306 | 61,778 | 70,823 | |||||||||||||
Income/(Loss) from Operations | 1,338 | 2,253 | 3,504 | 1,076 | |||||||||||||
| Interest expense | — | (37 | ) | — | (164 | ) | |||||||||||
| Interest income | 134 | 73 | 230 | 293 | |||||||||||||
| Foreign exchange gains (losses), net | (229 | ) | (333 | ) | 57 | (418 | ) | ||||||||||
| Write-down of investment | — | (900 | ) | — | (1,150 | ) | |||||||||||
Income/(Loss) before Income Taxes | 1,243 | 1,056 | 3,791 | (363 | ) | ||||||||||||
Income Tax Provision | (120 | ) | (258 | ) | (597 | ) | (862 | ) | |||||||||
Net Income/(Loss) before minority interest | $ | 1,123 | $ | 798 | $ | 3,194 | $ | (1,225 | ) | ||||||||
| Equity in income of affiliate | — | $ | 51 | — | $ | 51 | |||||||||||
| Minority interest | $ | (81 | ) | $ | (50 | ) | $ | (168 | ) | $ | (40 | ) | |||||
Net Income/(Loss) | $ | 1,042 | $ | 799 | $ | 3,026 | $ | (1,214 | ) | ||||||||
Retained earnings/(deficit) brought forward | $ | (61,987 | ) | $ | (62,762 | ) | |||||||||||
Retained earnings/(deficit) carried forward | (58,961 | ) | (63,976 | ) | |||||||||||||
Basic and diluted net income/(loss) per share | $ | 0.04 | $ | 0.03 | $ | 0.12 | $ | (0.05 | ) | ||||||||
Share used in basic and diluted net income per share calculations | 26,308,949 | 26,303,949 | 26,307,887 | 26,303,949 | |||||||||||||
| Notes: | 1. | As of December 31, 2001, the Company adopted the Emerging Issues Task Force Issue No. 00-14, “Accounting for Certain Sales Incentives” (EITF 00-14). EITF 00-14 stipulates that the reduction in the selling price of the product or service resulting from any cash sales incentive should be classified as a reduction of revenue. The adoption of this EITF resulted in the Company reclassifying certain sales incentives from a sales expense to a reduction of revenue for the period of three months and nine months ended September 30, 2001. This reclassification represented less than 3% of revenues for the said periods and did not impact net income. | ||||
| 2. | Reflects the non-cash compensation expenses associated with the employee equity compensation plans. Non-cash compensation represents the following categories of expenses: |
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Sales | $ | 115 | $ | 13 | $ | 394 | $ | 254 | ||||||||
| Circulation | 61 | (38 | ) | 217 | 49 | |||||||||||
| General and administrative | 358 | 386 | 961 | 1,236 | ||||||||||||
| Online services development | 117 | 133 | 427 | 426 | ||||||||||||
| $ | 651 | $ | 494 | $ | 1,999 | $ | 1,965 | |||||||||
GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)
| Nine months ended September 30 | ||||||||||
| 2002 | 2001 | |||||||||
| (Unaudited) | (Unaudited) | |||||||||
Cash flows from operating activities: | ||||||||||
| Net income/(Loss) | $ | 3,026 | $ | (1,214 | ) | |||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||
| Depreciation and amortization | 6,695 | 6,695 | ||||||||
| Profit on sale of property and equipment | — | 35 | ||||||||
| Accretion of U.S. Treasury strips zero % coupons | (77 | ) | (93 | ) | ||||||
| Bad debt expense | 587 | 922 | ||||||||
| Non-cash compensation expense | 1,999 | 1,965 | ||||||||
| Write-down of investment | — | 1,150 | ||||||||
| Income attributable to minority shareholder | 168 | 40 | ||||||||
| Equity in income of affiliate | — | (51 | ) | |||||||
| Property and equipment written off | 152 | 23 | ||||||||
| 12,550 | 9,472 | |||||||||
Changes in assets and liabilities: | ||||||||||
| Accounts receivables | 1,214 | 807 | ||||||||
| Receivables from sales representatives | (2,532 | ) | 288 | |||||||
| Receivables from related party sales representatives | 2,900 | (57 | ) | |||||||
| Inventory of paper | 331 | 124 | ||||||||
| Prepaid expenses and other current assets | (93 | ) | (633 | ) | ||||||
| Long term assets | 48 | 221 | ||||||||
| Accounts payable | (715 | ) | (2,341 | ) | ||||||
| Accrued liabilities and liabilities for incentive and bonus plans | (210 | ) | 478 | |||||||
| Deferred income and customer prepayments | 1,614 | 910 | ||||||||
| Tax liability | 276 | 285 | ||||||||
Net cash provided by operating activities | 15,383 | 9,554 | ||||||||
Cash flows from investing activities: | ||||||||||
| Purchase of property and equipment | (3,123 | ) | (3,735 | ) | ||||||
| Proceeds from sales of property and equipment | — | 309 | ||||||||
| Proceeds from matured bonds | 160 | 170 | ||||||||
Net cash used for investing activities | (2,963 | ) | (3,256 | ) | ||||||
Cash flows from financing activities: | ||||||||||
| Repayment of short-term borrowings | — | (3,000 | ) | |||||||
| Amount received towards directors stock option plan | 50 | 164 | ||||||||
Net cash generated (used for) from financing activities | 50 | (2,836 | ) | |||||||
| Net increase in cash and cash equivalents | 12,470 | 3,462 | ||||||||
| Cash and cash equivalents, beginning of the year | 20,236 | 12,727 | ||||||||
Cash and cash equivalents, end of the period | 32,706 | 16,189 | ||||||||
Supplemental cash flow disclosures: | ||||||||||
| Income tax paid | $ | 321 | $ | 577 | ||||||
| Interest paid | — | 163 | ||||||||
